The municipal market completed a few competitive deals and one notable negotiated sale on Tuesday, while awaiting an expected interest rate increase at the Federal Open Market Committee meeting.
Light supply, record secondary bid-wanteds, and back and forth fund flows, in addition to uncertain federal policy, continue to create a complex environment, according to George Friedlander, managing partner at Court Street Group Research.
Though he described this week’s overall supply as “uninspiring” in a March 16 municipal report, he said the competitive Anne Arundel County, Md., deal should provide dealer support and leadership for the triple-A curve, while Philadelphia schools and Los Angeles airport deals lead the negotiated slate.
“From a technical standpoint, the equilibrium of supply and demand is being balanced by a dearth of supply from the primary,” even though last week was one of the largest new-issue supply weeks of the year, Friedlander wrote.
“The secondary market continues to see elevated bids-wanteds levels -- again, especially on the front-end and shorter-call credits,” he added.
Financial markets are awaiting the FOMC announcement on interest rates on Wednesday at 2 pm.
"While the FOMC is expected to raise short-term rates by 25 basis points this week, the heavy lifting comes with how the policy statement is crafted, any move on the dot-plot matrix with revisions to the summary of economic forecasts and how Chair Powell navigates his first press conference," said Jeffery Lipton, manging director, head of municipal research and strategy and fixed income research at Oppenheimer. "While we still think three rate hikes in 2018 are appropriate, a direct message that the Fed is concerned with potentially overheating conditions could portend that fourth rate increase" this year.
"Negative performance is being contained as new issue volume significantly trails year-over-year issuance with still uninspiring visible supply figures," he said. "Muni price discovery has been challenging as heavy pull-ahead volume in November and December largely displaced Q1 2018 product."
Primary market
In the competitive arena on Tuesday, Anne Arundel County, Md., sold $263.66 million of Series 2018 GOs consisting of consolidated general improvement bonds and consolidated water and sewer bonds. The bonds were won by Goldman Sachs with a true interest cost of 3.54%. The deal is rated Aa1 by Moody’s and AAA by S&P Global Ratings.
Also on Tuesday, the city and county of San Francisco sold $251.35 million of GOs, consisting of Series 2018A clean and safe neighborhood parks bonds of 2012, and Series 2018B transportation and road improvement bonds of 2014. The bonds were won by BAML with a TIC of 3.096%.
Since 2008 the City and County of San Francisco has sold about $5.8 billion of securities, with the most issuance occurring in 2017 when it sold $1.04 billion and the least in 2013 when it sold $306 million. The deal is rated Aaa by Moody’s and AA-plus by S&P and Fitch.
Piper Jaffray priced Portland Community College, Ore.’s $185 million of GO bonds. The deal is rated Aa1 by Moody’s and AA-plus by S&P.
Tuesday’s bond sales
Anne Arundel County:
SF City and County:
Portland Community College prelim pricing:
Treasury 4-weeks auctioned
The Treasury Department Tuesday auctioned $65 billion of four-week bills at a 1.720% high yield, a price of 99.866222.
The coupon equivalent was 1.746%. The bid-to-cover ratio was 2.88.
Tenders at the high rate were allotted 68.13%. The median rate was 1.670%. The low rate was 1.630%.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
